Archive for May, 2008

It seems not a day goes by that a credit card offer doesn’t shows up in my mail box or in my email. I get 0% balance transfer credit card offers, gas reward card offers, travel reward offers, and hundreds more. Have you ever closely examined the fine print of these credit card deals? I have. And I’ve found some interesting terms and conditions that every consumer should be aware of before applying for a credit card. So the next time you get a credit card offer, make sure you understand the following terms.

Credit Card Fees

Credit cards come with a variety of potential fees. These fees include an annual fee to have the credit card, fees for late payments, and fees for exceeding the credit limit of your card. You should make sure you understand how much these fees are, and more importantly, how to avoid them. Many credit cards today do not charge an annual fee, so there’s really no reason to pay a fee unless the card offers some excellent rewards or other benefits.

Another type of fee is the balance transfer fee. If you are applying for a 0% balance transfer card, it is critical that you first understand how much the credit card company will charge you for the balance transfer. Many cards come with a no fee balance transfer if you transfer balances when you apply for the card. Other cards charge a fee of about 3% of the balance transfer amount. But here’s the catch. While some credit cards caps the amount of the balance transfer fee (usually to about $75), many do not. Think about it. With a 3% balance transfer fee for an introductory zero percent interest rate that lasts 6 months, you are effectively paying an annual percentage rate of 6%! In short, balance transfer offers with an unlimited balance transfer fee are seldom a good deal.

Introductory interest rates

It’s always important to know the interest the card company will charge. The interest rate is set in part on your credit score. This means that no everybody with the same card will be charged the same rate. That’s another reason to keep your credit score in good shape. But you must pay particular attention to any introductory rates.

Introductory interest rates are typically low interest rates on purchases or balance transfers that last for a relatively short period of time. These introductory rates can last just a few months, while I have seen some that last as long as 15 months. But the point is that they don’t last forever. And it’s important to make sure you understand two things.

First, you need to know when the introductory rate will expire. This helps you plan what you’ll do when the interest rate increases on you. For 0% balance transfer rates, for example, I’ll make sure I have enough available credit on my home equity line of credit before accepting the credit card offer. Second, it’s critical to know what the interest rate will be AFTER the introductory rate expires. I have some cards that go up to a somewhat reasonable 7.99%. But other cards can wallop you with double digit interest rates.

Understand the Rewards Programs Offered by the Credit Card

Almost all credit card offers today come with some type of rewards program. Whether you’ re looking for points to redeem for travel, cash back rewards, 0% offers, or some other program, it’s important to understand the terms and conditions of the rewards offer. Many programs offer introductory specials that last for a limited time, for example. Some gas reward programs offer as much as 10% cash back on gas purchases, but only for a limited time. Whatever the terms are, it’s critical to simply take a few minutes to read through the program so you understand the benefits the credit card offers.